Correlation Between IShares ESG and PIMCO Investment

Can any of the company-specific risk be diversified away by investing in both IShares ESG and PIMCO Investment at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares ESG and PIMCO Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares ESG USD and PIMCO Investment Grade, you can compare the effects of market volatilities on IShares ESG and PIMCO Investment and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares ESG with a short position of PIMCO Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and PIMCO Investment.

Diversification Opportunities for IShares ESG and PIMCO Investment

1.0

Correlation Coefficient

IShares ESG  PIMCO Investment

No risk reduction

The 3 months correlation between IShares and PIMCO is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG USD and PIMCO Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Investment Grade and IShares ESG is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares ESG USD are associated (or correlated) with PIMCO Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Investment Grade has no effect on the direction of IShares ESG i.e., IShares ESG and PIMCO Investment go up and down completely randomly.

Pair Corralation between IShares ESG and PIMCO Investment

Given the investment horizon of 90 days IShares ESG is expected to generate 1.11 times less return on investment than PIMCO Investment. But when comparing it to its historical volatility, iShares ESG USD is 1.01 times less risky than PIMCO Investment. It trades about 0.1 of its potential returns per unit of risk. PIMCO Investment Grade is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,451  in PIMCO Investment Grade on December 29, 2024 and sell it today you would earn a total of  205.00  from holding PIMCO Investment Grade or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares ESG USD  vs.  PIMCO Investment Grade

iShares ESG USD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG USD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares ESG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

PIMCO Investment Grade

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Investment Grade are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, PIMCO Investment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares ESG and PIMCO Investment

The main advantage of trading using opposite IShares ESG and PIMCO Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, PIMCO Investment can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in PIMCO Investment will offset losses from the drop in PIMCO Investment's long position.

The idea behind iShares ESG USD and PIMCO Investment Grade pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.